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Structured Investments

July 17, 2010
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A structured investment vehicle (SIV) was an operating company that purchased long-term assets and funded these purchases by selling short-term commercial paper or notes. Thus, the strategy of SIVs was to borrow money by issuing short-term securities at low interest rates and then lend that money by buying long-term securities at higher interest rates, with the difference in rates going to investors as profit. Long term assets could include, among other things, residential mortgage backed securities (RBMS), auto loans, student loans, credit cards. Because of this structure, SIVs were considered to be part of the.

Invented byin SIV's were popular until the market crash of 2008. SIVs were a type of credit product; they were often from $1bn to $30bn in size and invested in a range of , as well as some financial corporate . SIVs had an open-ended (or evergreen) structure; they planned to stay in business indefinitely by buying new assets as the old ones matured, with the SIV manager allowed to exchange investments without providing investors transparency or the ability to review the structure. At their peak in July 2007, SIVs had asset under management of $ 400 billion.